Many folks are perplexed as to the world of mortgage banking and concerned about the process of applying for a loan. I am here to say: “it’s not that tough, just a little paperwork and prior planning and you’ll be on your way to homeownership”.
Here are the six easy steps through the process:
- Pre-Qualification – The term used to explain when a loan officer quickly reviews your personal information (income, assets and debts) to calculate and determine an appropriate loan amount and program for which you may qualify.
- Applying for your loan – The process when you meet with or talk with a loan officer and complete a loan application (via the phone, online or face-to-face). You provide the loan officer with your social security number and authorization to pull a credit report. At this time, most loan officers collect documents for the loan package – paycheck stubs, w-2’s and bank statements are among some of the documents the loan officer will require.
- Processing your loan – The process of packaging your loan and double-checking all of your information to confirm it is ready for underwriting review. If you are purchasing a property, and have a signed purchase agreement, please provide this agreement to the loan officer at this time.
- The appraisal process – Most borrowers forget that both the borrower and the house have to qualify for the loan. An appraisal is conducted to protect both the borrower and the lender, by confirming the value of the property. An appraiser will contact you or your real estate agent and set a time to come view the property. They will need access to both the interior and exterior of the home. The appraiser will pull comparable properties within close proximity of the subject property and make an assessment of value bases upon those comparable properties.
- Underwriting the file – The underwriter reviews the complete package (the borrower and appraisal of the home) to determine if the loan is approved or declined. It is very common for the underwriter to ask for additional information, so don’t be surprised if your loan officer asks for extra documentation. If your loan is not approvable under the terms you applied, then the underwriter might make a counter offer, if possible. Your loan officer will help and work with you to acquire any extra documentation needed or re-apply for a different loan.
- Closing the loan – The process where the funding department creates the paperwork (closing documents) that are then forwarded to the Title Company to review. The Title Company orders the title insurance, confirms all approval contingencies are complete and schedules a closing date and time. The escrow officer of the title company sits down with the borrower(s) and the seller(s), usually at separate times, to review and sign the documents. The escrow officer will then later confirm that the lender has “funded the loan”, usually by wire transfer and the seller receives payment and the borrower receives the keys to their new house (via the real estate agent). Now it’s time to celebrate!